Market jitters over 'Greece to quit euro'

World markets are braced for a turbulent week after a meeting of senior European finance ministers sparked rumours that Greece is poised to abandon the euro currency.

Euro ditch: Is Greece about to drop the currency?

The rumours, published on Friday by German magazine Spiegel, were met with denials from the ministers at the meeting and a furious rebuttal from Greek Prime Minister George Papandreou.

Spiegel claimed that German government sources said the meeting was called to discuss reports that Papandreou feels he has no option but to take his country out of the euro.

But speaking yesterday, Papandreou said the speculation was 'borderline criminal' and denied Greece had ever raised the idea of quitting the euro.

'No such scenario has been discussed even in our unofficial contacts. I call upon everyone in Greece and abroad, and especially in the EU, to leave Greece alone to do its job in peace.'

But the comprehensive denials are unlikely to kill all speculation. Previous rumours of crisis in the eurozone – including Greece's request for a £95bn bailout last year – have all been met with denials right up until they became fact.

Any break-up of the euro would send markets spinning, threatening the value of the euro and hitting bank shares, because if Greece defaults on its debts, banks across the eurozone would be hit by losses.

Greek minister of finance George Papaconstantinou was at the meeting on Friday in Luxembourg along with ministers from other eurozone countries, including France, Germany, and Spain.

Those at the meeting said it had been called to thrash out issues related only to the G20, the group of the 20 biggest global economies.

Luxembourg prime minister Jean-Claude Juncker said: 'We have not been discussing the exit of Greece from the euro area, this is a stupid idea, it is an avenue we would never take.'

Juncker did, however, confirm that eurozone finance ministers would meet on May 16 to discuss again whether Greece needed further financial help.

Despite last year's bailout, Greece has been unable to make much headway in reducing its vast debts. City analysts do not rule out an eventual Greek exit from the euro, given the country's vast debt burden.

But few expect it to happen soon. 'I don't think that it is at all likely,' said Ian Harwood, chief economist at investment bank Evolution Securities.

'There would be huge costs in leaving, and problems trying to ring-fence Greek depositors from the rest of the eurozone's banks and the difficulties of rescheduling debts in national currency.'

Greece, along with Ireland and Portugal, has struggled to meet its EU obligations. Away from the euro it could devalue its currency, a move that could boost its competitiveness and make its exports more attractive.

Despite the massive obstacles to leaving the euro, Greece would be entitled to do so under international law called 'lex monetae', under which a country's currency is whatever the government says it is.